Opinion
CIV No. 01-432 MV/LFG
March 6, 2002
O R D E R
THIS MATTER is before the Court on Plaintiff Angelina Salmerons (Salmeron) Renewed Motion to Compel, filed January 31, 2002 [Doc. 53]. In accord with the district courts practice rule, the motion, response, and reply were simultaneously filed. After careful consideration of the pleadings and pertinent law, along with oral argument by counsel for Salmeron and Defendant Highlands Ford Sales, Inc. (Highlands) at a February 20, 2002 hearing, the Court concludes that Salmerons motion should be granted in part and denied in part, as explained below.
Counsel for Western Surety Company also was present at the February 20, 2002 hearing but did not present argument with respect to Salmerons renewed motion to compel.
Summary of Factual and Procedural History
Salmerons complaint against Highlands includes allegations inter alia, that Highlands defrauded her by failing to disclose that the car she purchased was formerly a rental vehicle that had been wrecked. More than simply failing to disclose the cars history, Salmeron also asserts that Highlands affirmatively misrepresented the prior use of the vehicle she bought by telling her it was a demonstrator that was used only by the dealership. The fact that it had been used as a rental vehicle before being sold to Salmeron did not appear to have resulted in some sort of mechanical failure or problem with the car. Thus, this is not a typical lemon lawsuit.
Salmeron did not realize the car had been owned by a rental car company, until about five months after she bought it, when she discovered a document under the seat indicating that Dollar Rent-A-Car had been the prior owner. Although Salmeron was disappointed with this information since she was under the impression that only Highlands had previously used the vehicle, she did not inform Highlands about her concern until several more months passed. Due to some unrelated matter, Salmeron had the car inspected by a body shop man. He told Salmeron that the car had previously been in a wreck. Angered by this disclosure and the prior undisclosed rental history, as well as the alleged misrepresentations about the car, Salmeron brought her concerns to Highlands attention, but felt she was being given the proverbial run around by Highlands. Thus, she subsequently instigated this lawsuit. [Doc. 55, Ex. D.]
Highlands admits that it did not inform Salmeron that the used vehicle had been a rental car and argues that it had no statutory or common law duty to disclose such information. [Doc. 55 at 6.] In addition, Highlands concedes that it did not disclose to Salmeron that the vehicle had been wrecked during its rental car use but argued that it had no knowledge of this prior wreck. Finally, Highlands denies that it made any affirmative misrepresentations to Salmeron about the vehicle being a demonstrator and further states that no other customers have submitted complaints to it about the purchase of used cars that previously were used as rental cars or about disclosures concerning those vehicles.
During earlier discovery, Dollar Rent-A-Car, the original owner of Salmerons vehicle, admitted that it knew of the wreck to Salmerons car and did not disclose it to the broker that sold it to Highlands. [Doc. 55.] Highlands own mechanic also provided evidence that he had inspected the car and did not find or detect evidence of a prior wreck. Salmeron then settled her claims with Dollar Rent-A-Car as to allegations of non-disclosure of wreck damage and repairs and stated that she no longer is pursuing any claims against Highlands regarding non-disclosure of the wreck damage and repairs to the vehicle. [Doc. 55, Ex. F.]
Salmeron filed an earlier motion to compel [doc. 38], related to this renewed motion, seeking all documents concerning used car sales by Highlands for a six-month period, where the car was previously owned by a rental car company and previously suffered wreck damage. In a Memorandum Opinion and Order, filed December 11, 2001 [doc. 50], I granted Salmerons earlier motion to compel to the extent that Highlands had to produce redacted title certificates demonstrating if any used car sold, for the requested time period, was previously owned by a rental car company. Highlands also was required to disclose, for the same time period, its inspection reports on used vehicles it sold if those reports demonstrated prior wreck damage. However, because the Court was sensitive to the damage that might be occasioned to Highlands business with these disclosures and/or by contact of the customers by Plaintiffs counsel, the Court permitted Highlands to redact the name, address and telephone number of the customer on any responsive documents to be produced. The Court left open the possibility that additional customer contact information might be disclosed to Salmeron if she could demonstrate good cause for that information. [Doc. 50 at 3-4.]
In accordance with the Courts previous discovery order, Highlands produced redacted documents showing that it had sold 35 used vehicles in a six-month period that previously had been owned by rental car companies. Disclosures by Highlands also revealed that nearly 30 percent of Highlands used car inventory was from rental car companies. [Doc. 54.]
Renewed Motion to Compel
Salmeron argues that she must be provided with the unredacted customer contact information regarding the purchasers of 35 used vehicles from Highlands that were previously used as daily rental vehicles. In support of the renewed motion, Salmeron states that these customers are potential witnesses who may help her prove that Highlands intentionally defrauded Salmeron, engaged in a pattern and practice of affirmatively misrepresenting the use of used rental vehicles as demonstrators, and acted willfully and maliciously thereby supporting an award of treble damages under the Unfair Practices Act and punitive damages. Salmeron further claims that this type of neutral third party testimony regarding sales discussions Highlands may have had with other customers is critical to finding out the truth about these types of sales interactions and in meeting the clear and convincing evidentiary burden required to prove fraud. Salmeron also explains that she will be very careful in her contacts with Highlands customers, in an effort to prevent damage to Highlands business reputation. Finally, she argues that this discovery request is reasonably limited and that any possible harm to Highlands business reputation is outweighed by Salmerons need for these potential witnesses identities. [Doc. 54; February 20, 2002 hearing.]
Highlands asserts that the requested information is not in dispute because it will stipulate that it generally does not inform prior customers of a vehicles rental car history, unless the customers inquire about the prior use of a car. Such disclosures, according to Highlands, are not required under New Mexico law even though some states have created a legal duty to provide this type of information to used car buyers. Salmeron asserts that her allegations include more than the failure to make certain disclosures to customers. She alleges that Highlands made affirmative misrepresentations to her about the car and that she should be permitted to explore the possibility that Highlands made similar misrepresentations to other customers to demonstrate a pattern and practice of such conduct.
Legal Standard and Analysis
The starting point for discovery disputes is Fed.R.Civ.P. 26(b)(1). Rule 26 vests the court with broad discretion to tailor discovery as needed. Crawford-El v. Britton, 523 U.S. 574, 598, 118 S.Ct. 1584, 1597 (1998). The discovery rules provide federal courts with ample discretion to restrict discovery where the burden or expense of the proposed discovery outweighs its likely benefit. Bosaw v. National Treasury Employees Union, 887 F. Supp. 1199, 1213 (S.D.Ind. 1995).
Rule 26 generally provides for a broad scope of discovery. A party may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party. . . . Relevant discovery is defined as that information that appears reasonably calculated to lead to the discovery of admissible evidence. The court may, however, limit discovery if the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues. Fed.R.Civ.P. 26(b)(2)(iii).
After satisfying the threshold requirement of relevancy, a common sense determination must be made that includes a balancing process as to the needs and risks related to the requested discovery. In Burka v. United States Department of Health and Human Services, 87 F.3d 508 (D.C. Cir. 1996), the Court considered a discovery request under the Freedom of Information Act and related exemptions from disclosure. The Court, in Burka, addressed that discovery dispute by analyzing the protections available to litigants in civil discovery under Rule 26. Id. at 516. The Court explained:
[t] he decision to limit . . . discovery by means of a Rule 26 protective order rests on a balancing of various factors: the requesters need for the information from this particular source, its relevance to the litigation at hand, the burden of producing the sought-after material; and the harm which disclosure would cause to the party seeking to protect the information.
Id. at 517; see also Wright, Miller Marcus, Federal Practice Procedure Civil 2d § 2008.1 (1994) (discussing the concept of proportionality with respect to discovery requests). Under Rule 26, a court can limit the conditions, time, place or topics of discovery or, for example, limit the manner in which commercial information may be revealed. Id. 518; Fed.R.Civ.P. 26(c)(7); see also In re Convergent Technologies Lit., 108 F. R. D. 328, 331 (N.D.Cal. 1985) (discussing circumstances of the litigation, potential significance of information sought, whether discovery tool selected is the most efficacious, timing of the probe and balance between benefits and burdens to the parties.)
Here, Salmeron has demonstrated that the requested discovery, i.e., the contact information of customers who purchased 35 vehicles from Highlands within the pertinent six-month period, is relevant to her claims. However, under the balancing approach envisioned by the Federal Rules of Civil Procedure and the cases discussed supra, the Court finds that Salmerons request should be limited to the following extent. Rather than providing Salmeron with the address and telephone information of the pertinent customers, the Court will allow Highlands, at this time, to maintain the confidentiality of that information and instead, directs Highlands to mail out a questionnaire to each of those customers, similar to the one fashioned by the Court that is attached to this Order. The Court also requires Highlands to make a written stipulation as proposed in its response brief subject to objections it may make as to the admissibility of that stipulation at trial. [Doc. 55 at p. 6.]
The attached questionnaire may be used by the parties or it may be modified by mutual consent of the parties.
The Court has no reason to question Salmerons reassurances that Plaintiffs counsel would make every attempt to protect Highlands business reputation if allowed to make direct telephone contact with these customers. However, based on the circumstances of this litigation, the Court finds that Salmerons need for the address and telephone information of the customers presently is outweighed by the possibility of harm to Highlands, and therefore, that the request for discovery should be limited as proposed by the Court. The intent of the questionnaire is to determine if Highlands made affirmative misrepresentations to its customers and yet, offer a modicum of protection for Highlands reputation and business interests. Moreover, the Courts approach in using a questionnaire of this type has been utilized by another Judge in this District in a case brought by Plaintiffs counsel that involved employment discrimination allegations. [February 20, 2002 hearing.]
In balancing Plaintiffs need for the information against the risk of harm to Highlands, the Court considered the following circumstances and arguments: (1) Highlands is located in a small community; (2) dealerships tend to entertain a significant amount customer loyalty and repeat business (possibly from the customers to be contacted) that could be damaged by the proposed contacts; (3) Highlands apparently has not had any similar complaints from its customers regarding the sale of vehicles that were used as rental cars; (4) Salmeron apparently has never alleged that the vehicle she purchased was defective in some way because of its prior use as a rental vehicle; (5) it is not clear whether Salmerons cars value was impaired or whether her vehicle experienced more frequent and costly maintenance because of its former rental use; (6) New Mexico has not yet imposed a specific statutory duty on dealerships requiring the affirmative disclosure of a used cars prior history; (7) Highlands will provide a written stipulation addressing part of the discovery request; and (8) the very nature of telephone conversations between counsel and prior customers of a business, who apparently have not made any complaints about their vehicles, presents a real possibility of harm to Highlands business reputation. The Court is careful to note that this ruling arises out of a discovery dispute and is not intended to be any commentary on the merits of Highlands pending motion to dismiss or any other substantive motions. Those matters are strictly reserved for the trial judges sound discretion.
The Court recognizes that if information is withheld or misrepresented to a customer about the vehicles prior use, that customer might not have reason to submit a complaint about that which she or he is not informed. However, it seems that a customer would complain about a vehicle if that car were a lemon or had significant mechanical problems, which in turn could lead to the discovery of the cars prior use if previously unknown.
Salmeron does contend that the value of her vehicle is significantly diminished to the fact that the car was previously a daily rental.
Conclusion
For all of the reasons stated above, I conclude that Plaintiffs Renewed Motion to Compel should be granted in part and denied in part.
IT IS THEREFORE ORDERED that:
(1) Within twenty days from the filing date of this Order, Defendant Highlands shall mail the attached Questionnaire, or a Questionnaire mutually agreed upon by the parties, to the owners of the 35 vehicles identified in previous discovery, and file certification with this Court that Highlands complied with this portion of the Order.
(2) Upon receipt of any and all information from these customers in response to the Questionnaire, Defendant Highlands shall immediately supply that information to counsel for Plaintiff Salmeron, and shall certify to the court that this information was provided.
(3) Within twenty days from the filing date of this Order, Defendant Highlands shall file a written stipulation containing its earlier representations to Plaintiffs counsel regarding its general practice of not disclosing a used vehicles prior rental history unless requested from the buyer, subject to appropriate trial objections.
(4) If the Questionnaire results in responses indicating misrepresentations concerning the prior use, condition or history of the car, the Court will order that Defendant produce to Plaintiff the name, address and phone number of the individual, together with unredacted sales documents concerning that individuals purchase.
QUESTIONNAIRE REGARDING YOUR PURCHASE OF USED VEHICLE FROM HIGHLANDS FORD SALES, INC.
A lawsuit filed against Highlands Ford Sales, Inc., in Las Vegas, New Mexico, is currently proceeding in the United States District Court for the District of New Mexico. Under a confidentiality order, Highlands Ford Sales was directed to provide a list of customers who had purchased used vehicles from it during a specified time period. You were identified as one of those customers. As part of this current lawsuit, you are asked to take a few moments and answer the questions below. When you have completed this questionnaire, please return it by mail to the attorney listed below:
Martin Esquivel
Dines, Gross Esquivel, P.C.
6301 Indian School Rd. N.E. #900
Albuquerque, NM 87110
It is not necessary for you to contact anyone directly regarding this questionnaire, nor will anyone, at this time, be contacting you by telephone concerning these questions. Thank you for your cooperation.
* * * * * * * * * * * * * * * * * *
You have been identified as a customer who purchased a used vehicle ____________ [model/type] from Highlands Ford Sales, Inc. on ___________ [date].
a. Please describe any discussions you had with Highlands Ford Sales or its sales people concerning the prior history of this used vehicle. For example, did you ask about its prior use and condition, and if so, were you told anything about the vehicles prior use or condition? If you did not have any discussions with Highlands Ford Sales regarding this vehicles prior use or condition, please state that as well.
b. Were any statements made to you by Highlands Ford Sales or its sales people about the prior use or condition of the used vehicle you purchased. If so, please describe those statements and what you understood the prior use or condition of that used vehicle was.
c. Was any part of your decision to purchase the used vehicle based on what you understood the prior use or condition of the vehicle was?
d. If the answer to c was yes, please describe any statements made to you by Highlands Ford Sales or its sales people regarding the used vehicles prior use or condition that convinced you to buy the vehicle.
Please use the back side of this questionnaire or a separate sheet of paper to respond to these questions as needed.